Sharpen your Trading Skills With Key Trading Terms and Definitions


Arbitrage - When you buy a stock in one market and simultaneously sell it in another market at a higher price for profit.

Bear Market - A market in which share prices are falling or declining which usually encourages selling.

Bull Market – A market in which share prices are rising which encourages buying.

Blue Chip Stocks- Large and financially sound companies that have dependable earnings, often paying dividends to investors.

Broker - Someone hired to buy or sell stocks, assets or goods for others.

Bid - The highest price a buyer of a stock is willing to pay for a share of the given stock.

Day Trading - The purchase and sale of a stock or security within the same day.

Dividend - The payment made by a corporation to its shareholders, usually as a distribution of profits.

Execution – When an order to buy or sell has been completed.

Float – The number of publicly owned shares that are available for trading.

Forex – Or Foreign Exchange, is the trade of foreign currencies.

Going Long – When you hold on to a stock for a longer period of time betting that the price will increase, therefore you buy low and sell high.

Index - A measurement of a section of the stock market used by investors and financial managers to describe the market.

IPO – Or Initial Public Offering, is when a company’s shares are listed on one or more stock exchanges. Through this process, also known as floating, or going public, a privately held company is transformed into a public company.

Leverage - Borrowing capital to invest in more stock than what you can afford on your own.

Limit Order – Different from a market order in that you choose the price that your order gets executed at, not at the current market price.

Liquidity – How easily you can get into and out of a stock.

Margin - The money borrowed from a brokerage firm to purchase an investment. It is the difference between the total value of securities held in an investor's account and the loan amount from the broker.

Market Cap - A method used to get the valuation of a company. To get this valuation you multiply the number of shares outstanding (the total number of shares issued by the company) by the stock price.

Market Order - When you place an order to buy, sell or short sell the stock at the current market price.

Moving Average – A technical analysis tool that evens out price data by generating a constantly updated average price for a stock. This average is usually calculated over a 50-day or 200-day periods.

Penny Stock - A small company's stock that typically trades for less than $5 per share.

Pink Sheet Stocks - Stocks that trade over-the-counter (OTC). Pink sheet listings are companies that are not listed on a major exchange like the New York Stock Exchange (NYSE) or Nasdaq.

Portfolio - A grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds.

Pump and Dump - When somebody promotes a stock in order to sell it at higher prices. Pump and dumps are very common with penny stocks. 

Quote - The price of a stock as quoted on an exchange.

Scalp Trading - A trading style that specializes in profiting off small price changes, generally after a trade is executed and becomes profitable.

Sector - An area of the economy or stock market in which businesses share the same or a related product or service.

Short Selling - The practice of selling shares that one does not own at the time of selling them. They are sold in the hope that the price of those shares will decline, and one will profit by buying back those shares at a lower price.

Spread – The difference between the lowest ask price and the highest bid price of a share of a stock.

Stock Symbol - A unique series of letters assigned to a company for trading purposes.

Ex: Appl, Inc. is symbolized as AAPL, Adobe Systems is ADBE.

Swing Trading - Swing Trading is a strategy that focuses on taking smaller gains in short term trends and cutting losses quicker. With swing trading stocks are usually held for a few days to a couple of weeks.

Volatility - is a statistical measure of the dispersion of returns for a given security or market index. In most cases, the higher the volatility, the riskier the security

Volume – The volume of a given stock is the number of shares that changed hands, or is traded, during a given day.

Yield - The measure of the return on an investment that is received from the payment of a dividend.